| Lease Purchasing is one of the most profitable and | | | | be a good idea to do business as a corporation. |
| practical ways to be in real estate. You don't need a | | | | 2. Location of the property: Use the parcel |
| bank or an extensive line of credit to get started. | | | | identification number (PIN) and the street address. |
| There is an absence of Tenant & Toilet | | | | There should be no mistake about which property |
| problems (if setup correctly)! It's creative and even | | | | you are dealing with. |
| fun! Lease Purchasing can also be a nightmare if you | | | | 3. Date and Signature: Make sure all the owners sign |
| do not have the foresight to have well designed, | | | | the contract. This includes spouses, partners or |
| strategically written contracts. | | | | anyone who has ownership or an equitable interest in |
| Recently I was asked by a reader of my Lease | | | | the property. Big problems can occur with a Lease |
| Purchase Times © newsletter where he could | | | | Purchase if you don't have all the owners sign. Better |
| find good generic Lease Purchase contracts.To me | | | | yet, check the title, loans, etc. |
| that is like asking a neurological surgeon if he can | | | | 4. Terms: Be specific on the length of the contract. |
| recommend a do it yourself brain surgery kit and | | | | Strategy Tip: If you are negotiating with the owner |
| combination salad maker! | | | | make the contract for as long as possible. If you are |
| I advised the reader that there are generic contracts | | | | the owner or are subletting the property, make the |
| from several sources. One such source is your local | | | | contract no longer than one year if you are the |
| real estate agent or office. They have the | | | | invest try to get your agreement from 3 to 5 years. |
| multi-purpose fill in the many blank type forms. The | | | | 5. Be Specific: All the terms, including Price, Rent |
| question remains, however, are they any good or | | | | Credit, Closing Costs, Option Consideration, Financing |
| even WORTH THE PAPER THEY ARE WRITTEN ON | | | | and Escrow should be included. No term should be |
| ? | | | | ambiguous. Be specific |
| My handy Law Dictionary defines Generic as follows: | | | | 6. Assignment Clause: This is the most powerful |
| Something not specific or not referring to a specific | | | | section that you can place in your agreement. It |
| thing. Generic contracts are just that generic. They | | | | allows you to transfer-convey-sublet and recreate |
| are designed with the one size fits all concept. In | | | | new hybrid deals.With this one clause you can have |
| reality, they are not designed to protect you or your | | | | control of a property without transfering title, |
| interest in the particular Lease Purchase transaction | | | | lawyers, downpayments and so much more. |
| with which you are currently involved. I have | | | | 7. Indemnification: This protects you from liability |
| collected many of these so called generic Lease | | | | when one of the parties you are dealing with make |
| Purchase contracts for years; Not only have I | | | | errors intentional or otherwise. |
| received contracts from Realtors and stationary | | | | 8. Contract extensions: Sometimes you just need |
| stores; others came from the get rich quick, while | | | | more time to get the deal closed and go to the |
| staying in bed all day, books and seminars. They all | | | | bank; make sure you have that extra 30 days |
| have one thing in common. They are garbage ! They | | | | before the option expires in a special worded |
| are poorly written and lack the necessary clarity and | | | | paragraph. |
| or specific verbiage inorder for the contract to be | | | | 9. Rent Payment: Make sure the rent payment is tied |
| enforceable. I have designed and utilize 8 specific | | | | into the rent credit and maintenance; you don't want |
| contracts for my own Lease Purchase deals. Which | | | | to be a repair man or a bill collector. Create incentives |
| one I use is determined by the hat I am currently | | | | throughout your agreement. |
| wearing at the time. Am I the Landlord/Seller, the | | | | 10. Financial disclaimer: All great Lease Option |
| Tenant/Buyer or the Assignor/Assignee? Will I be | | | | Agreements have financial disclaimers specifically |
| Subletting, Assigning, Sandwiching, Pure Optioning or | | | | towards the financing when the option is exercised. |
| just quick flipping , bird dogging, networking or | | | | This one paragraph alone can save you thousands of |
| consulting ? | | | | dollars in potential legal fee's |
| TIP: I always carry a couple copies of my Lease | | | | 11.Legal Fee's: Speaking of legals fee's make sure you |
| Purchase Contracts in my cars trunk right next to my | | | | have a clause that states who pays what and the |
| earthquake/Wildfire emergency kit* compartment. An | | | | jurisdiction of your choice. In the event there is a |
| investor is always prepared especially if you live in | | | | frivolous lawsuit involving your Lease Purchase you |
| Southern California! | | | | can then recover all fee's. |
| Here are a few suggestions for items that should be | | | | 12. Disclose: The best way to avoid problems is |
| contained in any Lease Purchase Agreement. Some | | | | disclose all known negatives in writing. Make sure you |
| of these may seem like obvious inclusions. Having | | | | have a addendum attached to your agreement that |
| been involved in Lease Purchasing for many years | | | | contains every silly thing you can think of; power |
| now, I can tell you that the obvious is not always so! | | | | lines, earthquake faults, traffic intersections, future |
| 1. Identify the principle parties: Who is the Tenant | | | | construction etc. foresight is better than hindsight. |
| Buyer and who is the Landlord/Seller? It might even | | | | |